Does Canada Have More Economic Freedom Than The United States?

Pierre-Guy Veer, Foundation for Economic Education

When speaking of Canada, conservatives laugh at our “socialist neighbor to the north” with its lavish social programs. The main point of contention is, of course, Canada's infamous “socialized healthcare," which has been viewed as the epitome of a system NOT to imitate because of its high costs and long waiting times.

While, yes, Canada is dangerously close to Bernie Sanders’ dream of a single-payer system, the very structure of its system explains why Canada constantly ranks higher on the Heritage Foundation’s Index of Economic Freedom – #7, compared to the U.S. #17 ranking. And that structure is federalism.

Indeed, Canada’s 1867 constitution explicitly stipulates that hospitals – with a few exceptions – are under the exclusive care of the provinces.

Despite many of Ottawa’s incursions in the domain, one of the only major pieces of legislation from the federal government is the Canada Health Act. It has only 18 pages – nine if it were written in only one language but all laws in Canada are written both in French and English. Including this legislation, there are eight federal laws regarding health care, totaling about 137 pages.

Education works in a similar way. Section 93 of Canada’s Constitutional Act gives exclusive powers to the provinces – minus confessional protections for Catholics, Protestants, and Natives – to rule over education.

However, only two federal acts exist, totaling 33 pages: one creates a savings account for higher education while the other gives special grants to children of deceased veterans. There has been (and still is) controversy around the Millennium Scholarship Foundation, which grants federal money to students, but it’s the only major intervention still effective.

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In Search Of History

Thanks to "bracket creep," the inflation of the 1970s pushed millions of taxpayers into higher tax brackets even though their inflation-adjusted incomes were not rising. To help offset this tax increase and also to improve incentives to work, save, and invest, President Reagan proposed sweeping tax rate reductions during the 1980s. What happened? Total tax revenues climbed by 99.4 percent during the 1980s, and the results are even more impressive when looking at what happened to personal income tax revenues. Once the economy received an unambiguous tax cut in January 1983, income tax revenues climbed dramatically, increasing by more than 54 percent by 1989 (28 percent after adjusting for inflation).